The Centre has approved a ₹1,340-crore recapitalisation plan for regional rural banks (RRBs) to improve their capital-to-risk weighted assets ratio (CRAR), strengthening these institutions that are critical to the provision of credit in rural areas.
On Wednesday, the Cabinet Committee on Economic Affairs gave its nod for an outlay of ₹670 crore as the central share for the scheme on the condition that the release of the funds will be contingent upon the release of the proportionate share by the sponsor banks, an official statement said.
This would provide minimum regulatory capital for one more year viz. up to 2020-21 for those RRBs that are unable to maintain the minimum CRAR of 9%. This has been an ongoing scheme since 2011.
The RRBs are required to provide 75% of their total credit as priority sector lending with primary focus on agricultural credit, including small and marginal farmers, as well as micro entrepreneurs and rural artisans.
At a time of lockdown due to the COVID-19 crisis, financially stronger rural banks could also be crucial to ensuring liquidity in rural areas.
